Economic Essay Example | Topics and Well Written Essays - 500 words - 2

Economic - Essay Example Risk averse individuals are better off with purchase of insurance because they prefer certain losses to uncertain ones of the same scale. Given that the marginal utility of wealth is diminishing they are ready to give up certain and reasonable amount of money in the form of insurance premium to avoid chance of large and uncertain loss. Thus, it is in their interest to buy insurance because of certainty it provides. According to the expected utility model the individuals tend to undertake actions that increase the expected utility value (U), which can be expressed as the function of the income (Y). If the probability of the accident resulting in the loss of X is indicated as P and assuming that insurance company in the case of accident will pay the amount equal to X, the expected utility for an individual who does not buy insurance is equal to: If per unit tax on a good is imposed and the tax revenue is then used to offset the decrease in consumer surplus the consumers still would be worse of than before introduction of the tax. It happens because the consumer bears an excessive burden which is equal to the difference between the value of equivalent variation (compensation that allows the customer to achieve the same level of utility as before tax, graphically – vertical distance between pre- and post-tax indifference curves) and tax revenue that the government can use in order to offset the effect of tax (graphically - vertical distance between corresponding budget constraint lines). It may be beneficial for the companies offering service or good A to introduce a choice of price and service options in order to target the groups of customers with different levels of income and needs. The optimal bundle of the service A and all the other goods will vary depending on the budget constraint and marginal utility of A for a certain group. Introducing number of variations A1, A2,†¦., An (from low price – low service to higher priced

Legalization of drugs Essay Example | Topics and Well Written Essays - 1500 words

Legalization of drugs - Essay Example A CNN poll showed that a vast majority of Americans favoured the legalization of marijuana for medicinal purposes. These are times where the issue needs careful deliberation because any decisions taken could have far reaching positive or negative effects. More importantly the consequences of any such decision could be irreversible. Before the article presents the case for legalization there is an honest admission of the terrifying adverse physical and psychological effects of drug use. The fact that drug laws do have an impact on the availability of drugs is acknowledged. It also admits that if drugs are accessible more people will experiment with them. The basis for the case promoted here rests on two arguments - one of principal and the other practical. The principle propagated is the right to individual freedom which was articulated by John Stuart Mill the British liberal philosopher. According to Mill the individual is sovereign over himself as long as no harm is done to others. Action on this count is supported by the argument that the principle has already been adopted by the government in the case of alcohol and of nicotine.The practical argument comes from the fact that drug bans encourage illegal trade, corrupt political institutions and criminal regimes. The poor are more affected by the laws and punishments. The lack of legislation prevents control of drug use and quality leading to use by minors, increased dangers to users because of poor quality and a premium on selling strength causing hard drugs to be preferred because of the difficulty in procurement. Lack of data because of the ban also prevents a better understandi ng of the physical effects of drug use. ... The poor are more affected by the laws and punishments. The lack of legislation prevents control of drug use and quality leading to use by minors, increased dangers to users because of poor quality and a premium on selling strength causing hard drugs to be preferred because of the difficulty in procurement. Lack of data because of the ban also prevents a better understanding of the physical effects of drug use. Distribution of drugs could be done using the models of caffeine, alcohol and prescribed drugs - depending on which is best suited. The article provides a good overview of the arguments that the pro-legalization lobby present to promote their case. For sources the author primarily uses known facts. Certain statements lack credible sources, although they may be true. The statement that nicotine's addictive power is greater than that of heroine needs a credible source that is missing. The statement about America's imprisonment rate for drug offences also requires credible sources to be confirmed. The second article that we review is entitled "Legalise Drugs Now!" by Meaghan Cussen published in the American Journal of Economics and society in July 2000. Once again this is a pro-legalization article which is extremely well researched and written. The article enumerates several arguments in favour of legalisation namely the protection of civil liberties thanks to the free choice of use and trade of drugs, reduction in crime thanks to the reduced role of the drug mafia, reversal of the Potency Effect - meaning the tendency to use more potent drugs because of scarcity, health benefits because of regulation of quality and cleaner